A gift card is a restricted monetary equivalent that is issued by retailers or banks to be used as an alternative to a non-monetary gift. Highly popular, they rank as the second-most given gift by consumers in the United States (2006) being the most-wanted gift by women, and the third-most wanted by males. Gift cards have become increasingly popular as they relieve the donor of selecting a specific gift. In the United States, about $80 billion were paid for gift cards in 2006. The recipient of the gift card can use it at his or her discretion within the restrictions set by the issuing agency.
A gift card generally resembles a credit card being fabricated of a plastic card that is the size of a credit card. The card is identified by a unique number or code, not usually with an individual name, and thus could be used by anybody. They are managed by a clearing company; utilizing a national or global network for authorization. Some gift cards allow for replenishment of value, thus providing the ability to be used multiple times over the original value.
The gift cards may include a barcode or magnetic strip, which is read by an automated card reading machine. The cards may include a pre-established value, or have a value established at the time of purchase. In the latter case, the cashier enters the desired value and a point of sale system uploads the desired value for the card, which is cross-linked to the card ID, to a gift card database at the clearing company. Gift cards generally differ from stored-value cards (for use with machines such as vending machines, photocopiers, public transportation, and the like), which store the value directly on the card via a magnetic strip, an embedded smart circuit, and/or the like. To provide additional security, gift cards may need to be activated by calling a specific access number or entering information on a specific website.
Gift cards are divided into “open loop” and “closed loop” cards. The former are issued by banks or credit card companies and can be redeemed by different establishments, the latter by a specific store or restaurant and can be only redeemed by the issuing provider. The latter, however, tend to have lesser problems with card value decay and fees. In either case the giver would buy the gift card, and the recipient of the card would use the value of the card at a later transaction. A third form is the “hybrid closed loop” card where the issuer has bundled a number of closed loop cards; an example is a gift card for a specific mall.
Gift cards differ from gift certificates, in that the latter are usually sold as a paper document with an authorized signature by a restaurant, store, or other individual establishment as a voucher for a future service; there is no electronic authorization. A gift certificate may or may not have an expiration date and generally has no administrative fees.
One of the limitations of gift cards is that they are generally limited to a single merchant. Gift givers prefer to give gift cards from a single merchant, expressing a form of thoughtfulness in the selection of the gift. Giving a broader gift card, such as a credit card based value card, is considered similar to cash and could be construed as being less considerate. Although giving a specific merchant gift card is considered more thoughtful than giving a broader gift card such as a credit card based value card, doing so may not be preferred by the gift card recipient. Contrarily, giving a specific merchant gift card limits the use of the card by the receiving party to the specific merchant. A further concern is that specific merchant gift cards are considered unsecured debt by bankruptcy courts, and as such can become valueless when a company files for Chapter 11 reorganization.
Therefore, a gift card system and method that allows a gift giver to purchase a gift card reflecting a single merchant, give the gift card to a receiving party, and wherein the receiving party can use the gift card at a variety of merchants is highly desirable.